June 14, 2021
Summaries of the noteworthy orders passed by the various NCLT benches in IBC matters.
Approving a resolution plan ‘under protest’? – State Bank of India v. Mr. Subrata M Maity (RP of M/s. Bhatia Coke & Energy Ltd.)
State Bank of India, a member of the COC, had filed this application requesting the AA to nullify the concluded voting on the resolution plan. It alleged serious procedural lapses by the RP and a violation of Regulations 39(2), 39(3) and 39B to 39D. SBI also claimed that the final revised resolution plan had not been placed before the COC for deliberations, and that the proposal for settlement by the CD’s promoters was also pending under S. 12A.
The Respondent countered this successfully by drawing the attention of the AA to several facts –
SBI attempted to take a novel defence. It claimed it had voted for the plan “under protest”. The AA summarily struck down this argument, noting there was no such manner of voting allowed under the Code. It stressed that the COC ought to use its inviolable ‘commercial wisdom’ with due care and clarity; and that it can either approve a resolution plan or reject it, there was no in between. Having once approved the plan, the AA was not inclined to allow SBI to exercise its commercial wisdom anew. As for the purported procedural irregularities by the RP, the AA reminded that those can only be looked into once the resolution plan is placed before it for approval.
Uncrystallised claim and unexplained delay – The Assistant Commissioner of Customs (EPCG-EODC) v. Mr. Mathur Sabhapathy Viswanathan & Anr.
Here the Applicant, a government body, had filed an application to condone the delay in filing their claim before the RP. This delay was of 217 days. The first Respondent/RP informed the AA that not only was this delay unexplained, the Applicant was also aware of the initiation of CIRP against the second Respondent/CD. Most importantly, due to an ‘extension of licence exemption’ issue between the Applicant and the second Respondent/CD, the Applicant’s claim had not become exact. It hinged upon the result of a pending adjudication.
While dealing with this matter, the AA referred to the previously established judicial positions about late acceptance of a creditor’s claim. It first noted Regulation 12(2) of the CIRP Regulations which provides a 90-day window for the submission of late claims. It then pondered over whether this 90-day period was mandatory, or directory. The AA first cited Twenty-First Century Wire Roads Ltd. and Edelweiss Asset Reconstruction Co. Pvt. Ltd. v. Adel Landmarks Ltd., which had condoned delays beyond the said period. Then it also took note of State Bank of India v. ARGL Ltd., which clarified that since government dues are always reflected in the books of accounts of CD, an IRP/RP is bound to take their cognisance regardless of filing which is late or even absent.
However, the AA went on to note that the Applicant had not explained the delay and did not have an exact claim, while a resolution plan was pending the COC’s approval. Therefore, it dismissed the application.
Revival of application upon breach of consent terms – M/s. Sakthi Containers Pvt. Ltd. v. Bnazrum Agro Exports Ltd.
The Applicant, an operation creditor, had entered into a compromise with the Respondent/CD after filing a Section 9 application. Under a clause of the compromise memorandum, the OC reserved its right to reopen the insolvency application if the CD dishonoured its obligations. When the cheques issued by the CD were dishonoured, the Applicant sought to reopen its original application.
The Respondent claimed that the instalment it had failed to pay had fallen due after Section 10A came into effect. Therefore, it would create a new date of default for which the due amount did not meet the new threshold of one crore. Against this, the Applicant argued that the original default date would be considered for reopening the application.
The AA observed that if the application was not allowed to be revived, it would defeat the very spirit of IBC. And that restoration of the original application was warranted upon breach of the consent terms. It cited the NCLAT judgment in Sree Bhadra Parks and Resorts v. Sri Ramani Resorts and Hotels as well as the Supreme Court judgment in Ess Investments v. Lokhandwala Infrastructure to support itself.
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ABBREVIATIONS & ACRONYMS USED Committee of Creditors CoC Corporate Debtor CD Corporate Insolvency Resolution Process CIRP Financial Creditor FC The Insolvency and Bankruptcy Board of India IBBI The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 CIRP Regulations Insolvency and Bankruptcy Code, 2016 the Code National Company Law Appellate […]September 22, 2021